Jadestone Energy Inc., an independent oil and gas production company focused on the Asia Pacific region, reported today its condensed consolidated unaudited financial results for the three and six months ended June 30, 2018.

Second quarter highlights

• Total liquids production of 299,601 bbls, and natural gas production of 157,799 mmbtu, for a total of 4,239 boe/d(1) for the quarter, an increase of over 4% the same quarter a year ago, and over 3% up from the prior March 2018 quarter.
• Production from Stag of 256,077 bbls for the quarter, an increase of more than 9% over the same quarter a year ago and more than 6% up from March 2018 quarter, reflecting improved uptime and notwithstanding planned maintenance activities which caused the deferral of approximately 38,000 bbls (or 417 bbls/d for the quarter);
• Sales revenue of US$18.3 million, increased slightly from US$18.1 million in the same quarter a year ago, as increased benchmark prices more than offset the impact of lower aggregate production volumes given the expiry of the Ogan Komering license on May 19, 2018;
• Production costs of US$10.7 million in the quarter, down 52% from US$22.2 million in the same period a year ago, due to lower operating costs at Stag including workover costs;
• Positive cash from operations (before changes in working capital) of US$0.1 million, despite the lower production, and additional costs arising from the Stag turn-around, compared to cash used in operating activities of US$11.1 million in the same quarter a year ago;
• The Stag Oilfield reached a safety milestone of six years without a lost-time incident, and conducted a major planned maintenance turn-around to ensure ongoing facilities integrity; 
• Jadestone obtained approval for the Nam Du and U Minh outline development plan from Vietnam’s Ministry of Industry and Trade (“MOIT”) on May 21, 2018, and work on front-end engineering design (“FEED”), field development plan studies, and the early phases of gas sales agreement negotiations have begun;
• A new gross split PSC covering the Ogan Komering working area in Indonesia was awarded to Pertamina effective May 20, 2018, and the Company began direct business-to-business negotiations with Pertamina to formalise the Company’s participation in the new licence.Concurrently, Indonesia’s Minister of State Owned Enterprises has established a principal agreement to govern the mechanism by which Pertamina can confer an interest in the new licence and Pertamina’s corporate guidance for asset divestitures is being finalised.

(1) Net working interest and based on production at Ogan Komering averaged across the 49 days of Jadestone participation in the license during the quarter (April 1, 2018 through to May 19, 2018), plus the full quarter’s average share of production at Stag

Material developments

Subsequent to the end of the quarter, the Company also announced several material developments:

• A definitive sale and purchase agreement (“SPA”) with certain subsidiaries of PTT Exploration and Production Public Company Limited (“PTTEP”), to acquire a 100% interest in the Montara oil project, offshore Australia via an asset acquisition;
• Funded by a$110 million (gross) oversubscribed equity placing, upsized from an initial target of US$95 million;
• An underwritten secured reserve-based loan facility of US$120 million from Commonwealth Bank of Australia and Société Générale and;
• Admission and first day of dealings on the AIM Market of the London Stock Exchange on August 8, 2018.

Paul Blakeley, President and CEO, commented:
“Operations during the second quarter were executed safely, and according to plan.  I am pleased with the performance of our turn-around team in conducting major maintenance work at Stag in late April, which included planned production vessel repairs and integrity-focussed inspection work. While the downtime resulted in deferring production of 38,000 bbls into Q3, the positive impact of our operating philosophy on facility uptime has more than offset the deferral, meaning we are still able to show quarter-on-quarter growth from Stag and generate positive cash from operations.  With the maintenance turnaround behind us, and the next one not expected until 2022, I am increasingly confident that Stag will remain a safe and predictable source of cash flow and value creation.  

“Also during the second quarter, we have made significant progress toward executing our Vietnam growth strategy in respect of our proposed Nam Du and U Minh gas field development, with the MOIT approvals, and with FEED, gas sales agreement negotiations, and engineering procurement construction discussions now fully underway. 

“In addition, the transactions we announced after the end of the quarter demonstrate our team’s capacity to layer transformative inorganic opportunities into our portfolio.

“The Montara acquisition marks a step change in our business by adding 10.3 mbbls/d of production and 28.1 mmbbls of 2P reserves.  We are working with PTTEP toward closing the asset acquisition within September/October 2018, at which time, the economic benefits of the asset, dating back to the effective date of January 1, 2018, will be reflected in our financial statements by way of a closing adjustment to the purchase price. Accordingly, we have started working within the Montara organisation to ensure a seamless transfer of operatorship to Jadestone, and ongoing safe production operations.  

“In addition, our new financing arrangements will not only fund the acquisition, but have allowed us to repay the convertible debt facility we had with Tyrus Capital Event S.à r.l., which had been drawn to US$15 million. These steps simplify our balance sheet and establish the Company’s self-funded growth platform, with the capacity to generate annual free cash flow for many years, whilst simultaneously growing production.”

Operations update

Stag Oilfield (offshore Australia)
Crude oil production at Stag totalled 256,077 bbls during the quarter to June 30, 2018, an increase of approximately 9% from the same quarter a year ago, and up 6% from the prior quarter. This primarily reflects increased uptime, which more than offset the impact of approximately 38,000 bbls of deferred production due to a planned 12-day maintenance turnaround in April, concluded 1 day ahead of schedule.

Following the planned maintenance event, which was completed on May 3, 2018, production volumes have returned to approximately 3,300 bbls/d.  Average production for the quarter was 2,814 bbls/d.

The Company continues to pursue opportunities to enhance value at Stag, and is in advanced planning stages for its first infill well on the asset, expected to be drilled in the fourth quarter of 2018.

Ogan Komering (onshore Indonesia)
Production at the Ogan Komering PSC, under the terms of a temporary cooperation contract, totalled 68,823 boes, reduced by 47% compared to the prior quarter due to expiry of the cooperation contract on May 19, 2018, or 49 days into the quarter.

On a daily rate basis, average Ogan Komering production over the 49 days was 1,425 boe/d, decreased by just 2% from the prior quarter, as the partners continued their efforts to arrest natural declines of the producing fields.

Jadestone is engaged in direct business-to-business negotiations with Pertamina to formalise the Company’s participation in the new licence for the Ogan Komering working area, which was granted to Pertamina on May 20, 2018. The Company expects to reach satisfactory binding terms during the fourth quarter of 2018, with participation to be effective from the commencement of the new licence on May 20, 2018.

Financial overview

Jadestone generated adjusted EBITDAX of US$0.3 million for the quarter ended June 30, 2018, compared to a negative adjusted EBITDAX of US$11.5 million in the same period a year earlier. On an unadjusted basis, the Company reported a net loss before tax of US$3.9 million, compared to a net loss before tax of US$14.0 million for the same period a year earlier.

Both unadjusted earnings and adjusted EBITDAX were increased due to higher average realised prices, generating increased revenue despite lower overall production and sales. In addition, operating costs at Stag have fallen substantially, down 52% as compared to Q2 2017, a period before the Company took over operatorship. The Company continues to realise additional operating cost efficiencies throughout its operations at Stag.

The Company reported total book costs of production of US$10.7 million during the quarter, or just under US$32.70/boe production.

In connection with the Company’s commodity hedges, during the three months ended June 30, 2018, total non-cash charges of US$1.1 million were booked to the income statement and US$2.8 million to other comprehensive income to reflect current market values at June 30, 2018. In the same period a year earlier, the Company had no commodity hedges.

Investing activities for the quarter amounted to a cash outflow of US$0.2 million, comprised mainly of payments for oil and gas properties.

At the end of the quarter, the Company had US$6.6 million cash, plus a further US$10.0 million of cash in support of a bank guarantee, and another US$13.0 million undrawn on the Company’s convertible bond facility.